Header

UZH-Logo

Maintenance Infos

Who Gains from Credit Granted between Firms? Evidence from Inter-Corporate Loan Announcements Made in China


He, Qing; Lu, Liping; Ongena, Steven (2019). Who Gains from Credit Granted between Firms? Evidence from Inter-Corporate Loan Announcements Made in China. In: ASSA, Atlanta, 4 January 2019 - 6 January 2019.

Abstract

Who gains from inter-corporate credit? To answer this question we measure the impact of the announcements of inter-corporate loans in China on the stock prices of the firms involved. We find that the average abnormal return for the issuers of inter-corporate loans is significantly negative, whereas it is positive for the receivers. Firms issuing inter-group loans may be perceived by investors to have run out of worthwhile projects to finance, although the loans may bring benefits to these firms through the high interest revenues involved. Firms receiving these inter-group loans are being certified as creditworthy borrowers, although the cost on these loans may be high. Issuance of intra-group loans on the other hand may signal the propping up of financially distressed subsidiaries and their resultant expropriation in the future and the firms granting and receiving such loans will be assessed accordingly. Subsequent investment and firm performance confirms these immediate valuations as overall accurate.

Abstract

Who gains from inter-corporate credit? To answer this question we measure the impact of the announcements of inter-corporate loans in China on the stock prices of the firms involved. We find that the average abnormal return for the issuers of inter-corporate loans is significantly negative, whereas it is positive for the receivers. Firms issuing inter-group loans may be perceived by investors to have run out of worthwhile projects to finance, although the loans may bring benefits to these firms through the high interest revenues involved. Firms receiving these inter-group loans are being certified as creditworthy borrowers, although the cost on these loans may be high. Issuance of intra-group loans on the other hand may signal the propping up of financially distressed subsidiaries and their resultant expropriation in the future and the firms granting and receiving such loans will be assessed accordingly. Subsequent investment and firm performance confirms these immediate valuations as overall accurate.

Statistics

Downloads

17 downloads since deposited on 29 Oct 2019
17 downloads since 12 months
Detailed statistics

Additional indexing

Item Type:Conference or Workshop Item (Paper), refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Event End Date:6 January 2019
Deposited On:29 Oct 2019 14:03
Last Modified:29 Oct 2019 14:03
Publisher:SSRN
OA Status:Green
Related URLs:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2734657 (Organisation)
Other Identification Number:merlin-id:17222

Download

Green Open Access

Download PDF  'Who Gains from Credit Granted between Firms? Evidence from Inter-Corporate Loan Announcements Made in China'.
Preview
Content: Published Version
Filetype: PDF
Size: 400kB